Infrastructure Past, Present, and Future Casebook/Texas Power Grid

This casebook is a case study on the Texas Power Grid by Seiry Vasquez, Hawwa Khan, and Trinity McDonald, as part of the Infrastructure Past, Present and Future: GOVT 490-004 (Synthesis Seminar for Policy & Government) / CEIE 499-002 (Special Topics in Civil Engineering) Fall 2023 course at George Mason University's Schar School of Policy and Government and the Volgenau School of Engineering, and Sid and Reva Dewberry Department of Civil, Environmental, and Infrastructure Engineering. Under the instruction of Professor Jonathan Gifford.

Summary

Electric towers in Clay County, Texas

The Texas Power Grid is a electricity system that independently supports 90% of the electricity that currently sustains its residents and businesses alike. There are several parties that come together to ensure the functionality of this system that millions depend on everyday. Those involved in the system's upkeep also have the high responsibility of ensuring its success in the future.

The grid system is composed of many individual groups that work together to to allow the buying and selling of electricity through the grid. Generators produce the electricity, companies sell the power to families and businesses, and the transmission is handled by another subset who guarantee power is supplied to the correct places.

This power grid sustains the livelihood of millions of individuals and involves many actors, covers thousands of miles of the state of Texas, and is an essential aspect of the Texan economy. The power grid has taken decades to develop sustainably, to organize its funding, and the regulations for day to day rules have advanced to uphold this intricate power system.

List of Actors

There are many different actors involved in Texas's power grid. The following actors help us understand each party involved in the grids upkeep and what they do.

Texas Electricity Legislation

1992 Energy Policy Act:

• This federal act introduced greater competition in the electricity sector, by lifting legal barriers in power generation markets. It offered the possibility for new power generators to acquire open access to transmission and distribution systems and to sell within region-wide markets. The passing of this Act was a first step towards establishing the conditions for future deregulation by states.

1995 Senate Bill 373:

• This bill marked the beginning of the deregulation process in Texas. Senate Bill 373 required utilities in Texas to provide transmission service on a non-discriminatory basis, thereby allowing independent generators to compete in the wholesale electricity market. In 1996 the Public Utilities Commission of Texas (PUC) adopted the rules that would implement this bill, and established the Electric Reliability Council of Texas (ERCOT) as the independent systems operator of the Texas competitive wholesale electricity market.

1999 State Bill 7:

• State Bill 7 continued the deregulation process, and called for the introduction of "Texas Choice" for electricity to begin in January 2002. SB 7 required investor-owned utilities within the ERCOT service area to separate their business activities into different companies for generation, transmission, and retail services. Independent retail electric providers were permitted to compete with former utilities to provide service to residential and small commercial customers throughout the state.
• From 2002 to 2007 the newly-created retail electric providers associated with the former utilities were required to sell electricity at a mid-range price that was regulated by the PUC, known as the "price to beat". This was intended to promote customer switching and competition in the Texas retail electricity market, and was eliminated on January 1st, 2007.

Actors in the Electricity Generation & Wholesale Markets

Electric Reliability Council (ERCOT)

• ERCOT is the independent system operator for the ERCOT grid, which covers most of Texas (about 75% of Texas land area, and 90% of the state's power load), including more than 43,000 miles of transmission lines and 567 generation units. ERCOT's responsibilities can be separated into four main areas:

  

  Logo of Ercot

• It has four primary activities:

1. Operating the wholesale market upon which power is bought and sold
2. Ensuring open access to transmission within its territory
3. Long-term planning for system reliability
4. Administrating the retail switching process

Regulatory Agencies

Public Utilities Commission (PUC):

• Created by Texas legislature in 1975, the Public Utilities Commission of Texas (PUC) is the state agency responsible for regulating Texas's electric transmission and distribution utilities. Along with regulating electric TDU rates, the PUC is also responsible for overseeing competitive markets and enforcing compliance for the competitive retail electricity market. The PUC is responsible for disseminating educational information and can assist customers to resolve disputes with their utility. It also operates an electricity price comparison platform that is available to all retail electric providers to list their offers.

Electricity Transmission & Distribution Utilities

As electricity generation facilities are often located in areas far away from where it is consumed, electricity is transferred across high-voltage power lines before it reaches the distribution network. It then passes to lower voltage distribution lines before reaching its final point of consumption. Transmission & distribution facility owners in Texas are private, for-profit entities, but their rates and terms of service are regulated by the PUC.

There are five PUC-regulated utilities in Texas:

• AEP Texas: AEP Texas (which stands for: American Electric Power) is an investor-owned electricity utility company based in Corpus Christi, Texas. As one of the big five T&D Utility companies, AEP Texas operates on the deregulated ERCOT grid. AEP Texas (AEP Texas North & AEP Texas Central) service area covers Corpus Christi, San Angelo, Victoria, and many more. AEP Texas works with more than 70 retail electric providers (REPs) to deliver electricity to Texans. The AEP Texas power outage map and AEP Texas customer service number is available for customers to report an outage and view restoration times.
• CenterPoint Energy: CenterPoint Energy is an investor-owned electricity utility company that is based in Houston, Texas. CenterPoint is one of the big five Transmission & Distribution Utility (TDU) companies operating in Texas on the deregulated ERCOT grid. CenterPoint Energy Houston works with over 70 different retail electric providers (REPs) to deliver electricity to Texans. CenterPoint Energy customer service is available to help residents with project development, a CenterPoint Energy outage or gas leak, and have a specific CenterPoint Energy phone number for each type of customer service enquiry.
• Oncor: Oncor Electric Delivery, often just referred to as Oncor, is a Texas investor-owned electricity utility company based in Dallas, Texas. Oncor, which is sometimes mistaken for EnCore Energy (not currently operating in Texas), is one of the big five Transmission & Distribution Utility (TDU) companies operating in Texas on the deregulated ERCOT grid. Oncor works with over 70 different retail electric providers (REPs) to power Texan homes and businesses. The Oncor customer service number is available to assist consumers with power outages or project development, and have a specific Oncor phone number for each type of customer service enquiry. New residents moving into an Oncor service area will likely not need to contact Oncor to start electricity service.
• Sharyland Utilities: Sharyland Utilities is an electric transmission utility company that is based in Texas and regulated by the Pubic Utility Commission of Texas. Sharyland Utilities has experienced major acquisitions in recent years, which shifted ownership of Sharyland electric infrastructure to Oncor Electric Delivery. Sharyland Utilities LLC exists today on a much smaller scale and is concentrated in the far south of Texas.
• Texas-New Mexico Power: Texas-New Mexico Power is a Texas investor-owned electric utility company based in Dallas, Texas. As one of the five major Utility companies, Texas-New Mexico Power operates on the deregulated ERCOT grid. Texas-New Mexico Power works with more than 70 retail electric providers (REPs) to deliver electricity across Texas. Swipe (or scroll) down to find the Texas-New Mexico Power service area for consumers and their customer service contact phone numbers. Find, below, a few Texas-New Mexico Power outage resources that include the Texas-New Mexico Power outage map and contact information to report a Texas-New Mexico Power outage.

Electricity transmission & distribution utilities are responsible for maintaining and operating the transmission and local distribution lines. They start or stop electricity service, perform meter readings and are responsible for responding to emergencies such as power outages and downed lines.

Retail Electricity Providers

• Since 2002, Texans have had a choice of who provides their electricity. Retail electricity providers (REP) are responsible for providing electricity supply to consumers (residential, small commercial, or industrial), along with related customer service (billing, etc). In Texas, the retail electricity provider is the first point of contact for setting up a new account, or for questions about billing or electricity consumption (except for in an emergency such as a power outage, in which case the transmission & distribution utility should be contacted). You can find out more information about what's on offer in Texas in our retail electric provider profile pages.

Timeline of Events

• 1800s: The first electric companies in the US were created. There were no federal regulations for the electric industry when it was new. Utility companies throughout Texas were formed to generate electricity for ice plants. Those companies then began to sell their excess electricity to businesses and homes around their facility.
• 1924: Dallas-area Texas Power & Light Company built the first true interconnection in the state in 1924. In 1926, HL&P started building interconnections to sell excess power, and linked its network of transmission lines to the Gulf States Utilities system just east of Huffman, Texas, in 1927.
• 1930s: Electrification in Texas resembled electrification in many other parts of the country, apart from the regulatory relationships within the state.
• 1935: The Texas Interconnected system was created due to northern and southern Texas coming together to form one electricity transfer in the state. However, President Franklin D. Roosevelt passed the Federal Power Act in 1935, which regulated any electric company with operations across state borders. To avoid regulation, Texas energy companies from that time decided to operate without interstate connections, and this continues today.
• 1941: The creation of the Texas Interconnected System was made, which allowed for any excess generation to be transferred to the Gulf Coast region.
• 1942: Most significantly for Texas power companies, the FPC issued an order that relieved utilities of federal regulation if they joined interstate interconnections for the purpose of providing electricity to the war industries.
• 1965: Came the worst power outage in U.S. history. While it didn’t impact Texas, it did prompt a national policy change: new federal regulations were introduced to ensure the reliability of the nation’s power grid.
• 1966: Electric Reliability Council of Texas(ERCOT) was appointed to facilitate the power flows and exchanges between emerging utilities and became the country’s first independent system operator, otherwise known as an ISO.
• 1970: The Electric reliability council of Texas was formed. Texas utilities organized ERCOT in 1970 as part of a nationwide effort by power companies to address reliability concerns while protecting their relative autonomy from federal oversight.
• 1990s: Texas deregulates their electricity market which would allow more competition between electricity companies in which there main goal was to increase the efficiency and reduce consumer costs. In 1999, the Senate Bill 7 was passed in Senate as this was a reform policy to improve the quality of the grids and along with the consumers satisfaction for the reliable energy resources they have.
• 2000s: Many electricity failures shortly occurred after the time of deregulation and the passing of Senate Bill 7 as prices increased drastically and many blackouts occurred across the state.
• 2010s: Winter storms occurred in Texas which resulted in blackouts caused by the Texas Power Grid which left 3.2 millions of homes without any electricity.
• February 2021: As Winter Storm Uri wreaked havoc across Texas in February, pundits, politicians and the public reflected on the unique status of the state’s isolated electric power grid. The electricity is provided by two sources natural gas and wind power. Natural gas is the main source and wind power is the second source. These sources aren't weatherized, which caused the disruption in 2021. In general, natural gas wells and wind turbines in Texas are not weatherized for the extreme cold. As a result, the 2021 winter storm disrupted the two largest electricity sources in the state.
• March 2021: Investigations into the incident reveal a combination of factors contributing to the grid failure, including insufficient winterization of power generation facilities, natural gas supply shortages, and equipment failures.
• April: Texas Governor Greg Abbott calls for legislative action to reform and strengthen the state's power grid and energy infrastructure.
• May 2021: The Texas Legislature passes Senate Bill 3 and House Bill 1520, aimed at addressing the issues that led to the power grid failure and implementing reforms in ERCOT's governance and operations.

Maps & Location

A map showing the locations of electric power grids in Texas and which sector controls them

Texas Power Grid Location The Electric Reliability Council of Texas (ERCOT) operates the electric grid for 75% of the state.

The Panhandle, South Plains, and the corner Northeast Texas fall under the Southwest Power Pool (SPP).

El Paso and the far West corner of Trans Pecos fall under the Western Electric Coordinating Council (WECC).

The Southeast corner of Texas falls under the Southeastern Electric Reliability Corporation (SERC).

(If map is has been taken down, please reference this link: here)

Map showing electric load zones by ERCOT in Texas

Funding and Financing

The Electric Reliability Council of Texas (ERCOT) manages close to 90% of Texas' electricity flows and payments. The electricity supply for more than 24 million Texan homes comes from 550 power stations connected across the Texas Power Grid. ERCOT is funded by a System Administration fee of 55.5 cents per MWh (megawatt hour) to cover system costs. It costs an average 50-60 cents per month, around$7 per year, for an average residential home in Texas.

As far as the entirety of the Texas Power Grid, most if it is operated by federal funding. The Texas division of Emergency Management will receive $60.6 million in 2023 from the federal government to aid in strengthening the infrastructure of the electricity grid. These funds will help improve the grid to withstand extreme wether conditions and natural disasters, such as the power outage incident son February 15, 2021.

Funds are split up and used accordingly throughout different necessary tasks to ensure smooth operation of the grid and reinforce it. These funds will be put towards various programs that include trimming trees around power lines, improving equipment functions in extreme temperatures, and other infrastructure improvements. The Department of Energy is planning on funding $2.3 billion over the next five years to address power grid resilience issues in many states, Texas being one of them.

The Public Utility Commission (PUC) of Texas is responsible for regulating billing and taxpayer funds in many sectors of Texas, one of them being the electricity bills and matters regarding the Power Grid. ERCOT and PUC work together, along with the Texas Commission on Environmental Quality, to align federal proceedings and ensure efficient use of resources/funds. Thus, the primary source of funding for the Power Grid is federal funding.

To date, approximately $173 million in funding has been allocated to Texas in 2022 for weatherization and $30.3 million to prevent outages and make the grid more resilient. An approximate $525 million has been allocated to Texas for infrastructure resilience in 2022.

Institutional Arrangements

The flow of power that governs the Texas Power Grid currently follows a structure that is essentially a hierarchy, starting with the governor of the state, currently Greg Abbott, who has the power to select those in charge of running the system. Those that he appoints make up the Public Utility Commission, who from there regulate the Electric Reliability Council of Texas (ERCOT). ERCOT then is responsible for managing the power grid. The positions that make up the council then are in control of overseeing the day to to day operations.

Because no one entity has complete control of the entire system, certain companies are responsible for producing power through electricity generators while others act as retail electric providers then sell the power to residents of Texas and businesses. Lastly transmission companies who direct that power are also compensated through customers' electricity bills. So, while ERCOT is a part of the regulation and decision making for the grid, there are many parties that are also able to influence the decision making surrounding the Texas Power grid.

The more specific day to day tasks which help to regulate the grid include:

Market Systems

1. Market Administration: operates the efficient and fair wholesale of electricity between the generators of electricity and the providers who sell it.
2. Operations: responsible for the balancing of the grid system. At any given time electricity within the Texas Power grid is being created, used, and sold. This means ERCOT must continuously monitor the grid to be sure that stability is maintained while the demand is also met.

Planning

1. Upgrades and Planning: regularly ERCOT measures through assessments the potential need for additional transmission units and generators to meet and anticipate electricity demand. This means additional infrastructure has the potential to be added in the future to help further support the grid.
2. Emergency Management: like in the case of the 2021 grid disaster, ERCOT is responsible for doing all they can to ensure that grid failure does not occur. In the case that it does, ensuring that ERCOT is more prepared to respond to disaster.
3. Consumer Protections: additional legislation is currently in the works to offer additional protection for families and businesses, so that in the case of grid failure, residents still have the necessary tools to keep themselves safe.

Narrative of Case

The Texas Power Grid was officially formalized in 1970 when the Electric Reliability Council of Texas (ERCOT) was established to ensure the functionality of the electricity system throughout the state. This power grid is largely separate from the rest of the country making it unique in the way that it functions and upholds itself. The isolation of Texas’s power grid is due to many factors, largely the number of interested parties or companies that contribute to and profit from the system.

The term ‘grid’ is meant to reference the many miles of generating facilities and the transmission lines throughout the state of Texas that produce electricity and then ship it to vast distances to be utilized. This grid can deliver power to individual customers, be it a family of residents or independent businesses. The Texas power grid did not start very differently from the rest of the country as it adjusted to incorporating electricity into citizens’ everyday lives.

In the early days, (the 1880s- early 1900s) many companies operating at the time to upload and create the grid dealt with company mergers, takeovers, and bankruptcies as well as maintenance challenges, and frustrations working with the city government. Around World War II, two systems referred to as the North and South Texas Interconnected Systems were organized by power companies at the time to meet the needs of the defense industries. Over several decades (until the creation of ERCOT in 1970) the system grew and became a more connected and isolated system until it was known as the Texas Power Grid. The companies today that are responsible for selling, producing, and transferring electricity throughout Texas still have significant influence over the future of the power grid.

In 2021, the Texas Power Grid gained national attention when the power grid failed, in the wake of serious winter weather that Texas was not prepared to handle. The vulnerabilities of this system were well known by its regulators and Texas lawmakers who instead prioritized the profit of these large companies. This electricity failure resulted in thousands going without power. As a result  246 people would lose their lives due to going without heat for a number of days. An infrastructure system that supports millions was unable to sustain itself and support citizens. This has raised questions and concerns as to its functionality and ability to uphold itself, citing the need for repairs and upgrades across the board to ensure its success in the future.

Policy Issues

Following the deadly winter storm in February of 2021 that knocked out power for millions of citizens in Texas and hundreds of deaths, CPS Energy (the municipal electric utility serving San Antonio) came forward strongly in favor of ending Texas’ “solo” approach to its power grid. The Federal Energy Regulatory Commission (FERC) is considering taking actions that could force Texas power grids and other states’ grids to connect with each other to reduce the chances of having a large-scale blackout again. The regulatory body has authority to set reliability standards for the Energy Reliability Council of Texas (ERCOT), which operates the grid. Texas is reluctant to take this drastic step of connecting their power grid with other states because they are concerned it will put them under more federal regulation. However, CPS Energy and others say that if they had the option to import power from other states in cases of emergency, like the storm in 2021, the power outages would not be as severe. They could not only prevent the effects of the 2021 power outage, but also increase revenue by selling excess power outside of Texas. According to ERCOT, Texas added more than 3,000 megawatts of solar and another 1,000 megawatts in wind generation, which results in plenty of surplus of energy. Power companies like CPS could sell this surplus of energy to others outside the state, while getting energy from them in times that they need it, which results in new revenue and a reduction of rates paid by customers.

In Congress, lawmakers are working on policies that would result in expanding power grids and increasing interconnectivity among states. Senator John Hickenlooper and Representative Scott Peters introduce new legislation that would require all power grids nationwide to maintain interconnections with neighboring grids. This would mean Texas would construct transmission lines capable of delivering 25 gigawatts of electricity to Louisiana, Arkansas, Oklahoma, and New Mexico – which is enough power to supple 22 million homes. Initially, the legislation stipulated that FERC’s authority not be expanded over the state’s power grid but have changed the bill to make Texas’ participation voluntary. The issues with this idea of connecting the grids across the nation is that some of the neighboring states also do not have the energy capability to deliver power to Texas in a state of emergency/blackout. Thus, many are arguing that it is pointless to connect with local grids, when there is no guarantee that either one can deliver the energy needed in a time such as the 2021 blackout.

Some of the proposed bills to the power grid:

• Senate Bill 6: This would direct the state to hire one company or more to build up to 10,000 megawatts of new gas-fueled power generation that can be activated during emergencies – a “backup” system. This would create state-backed, low-cost loan program to cover maintenance/modernization of current power generators.

• Senate Bill 7: This would allow power generators to bid a day ahead of providing specific services separate from everyday energy market. So, generators that need four hours in time of need to provide power can turn on within two hours of being needed. This will also fix “market distortions” from federal tax credits what wind and solar power generators receive.

• Senate Bill 2012: Incentivize companies to build more dispatchable power/keep existing dispatchable power online. It would also create a legislative oversight committee to oversee its implementation.

• Senate Bill 1287: Require the Public Utility Commission (PUC) to set a cap for how much Texans pay for power producers to connects the state’s power grid and require companies to pick up the remaining cost. This will encourage companies to build new power plants close to their customers/existing infrastructure rather than picking the cheapest land.  

The biggest issue/reason why these bills, legislation, and policies have not been passed/implemented in highly based on Texas' cooperation. Texas does not want to increase federal regulation of the power grid because it decreases their reach across the power sector and their stake. Additionally, the biggest reason for these regulations is to prevent the events of February 2021 from happening again, however, many believe interconnections of grids among neighboring states is not the solution because most of the neighboring states do not have the capacity to provide power to Texas when needed and most suffer from power outages/lack of energy themselves.

Takeways

The Texas Power Grid is a prime example of the interconnectivity of infrastructure throughout a region. The grid expands throughout more than 90% of the state of Texas and is ever expanding in order to improve the flow of electricity throughout Texas. The system, in and of itself, is a relatively well functioning system, however, it is susceptible to extreme weather conditions, natural disasters, and the impacts of these conditions can be drastic to large regions of Texans, resulting in power outages across the state. Remaining knowledgeable about Texas’s power grid system is the key first step to ensuring its success in the future.The power grid, through its generating and transmission facilities produce electricity and ensure that Texas continues to function.

Discussion Questions

1. When it comes to the Texas Power Grid and the money that is generated for various companies, does the interest big business out the customers needs and safety?
2. In what ways does the function of the Texas Power Grid allow for a continuous flow of commerce?
3. How could the Texas Power Grid improve its efficiency?
4. How beneficial is it to connect power grids among neighboring states? Is it a viable solution?
5. How can the production of power be improved within a state, as well as between connected state power grids?